Tuesday, August 17, 2010

"The third thing I’ll mention is this new announcement today of a proposal to introduce an infrastructure bond, an infrastructure bond which will leverage tens of billions of dollars of private sector investment with a relatively small investment by the taxpayer, so the taxpayer will not be at risk but we will attract with this infrastructure bond tens of billions of dollars of investment.

It does demonstrate that there is an alternative to borrowing $100 million a day. There is an alternative. If you can work with the private sector, this infrastructure bond will work, through Infrastructure Australia, identify a range of nationally important projects. It could be water-related, it could be road, rail, they’ll be significant infrastructure projects which give a strong productivity outcome then we will do benefit cost analysis and all of those we will get Infrastructure Australia to do that, then we invite tenders from major companies.

Those companies that are successful with particular projects will be able to issue infrastructure bonds, commercial bonds and we as a government will be provided a ten per cent tax rebate, so I’ll give you an example. A big construction company wins a project for a dam or a railway or whatever, they will issue a bond, let's say it’s $1,000 ten year bond, it’s a $1,000 bond, 10 years, if it has a return of ten per cent every year the investor gets $100 for that bond for 10 years.

So, very attractive to individual investors and very attractive to superannuation funds. If they get their $100 return each year, there will be a ten per cent tax rebate, so there is a $10 tax rebate for every return on every bond that they own, so as a consequence, superannuation funds which pay 15 per cent on the return on their investments, two-thirds of their tax liability will be covered by the tax rebate. Ok? So, we have estimated, with advice from the market, that over ten years, with an investment which is capped, we know what the liability is, capped at $1.5 billion we will attract or leverage $20 billion worth of private sector investment. Now, that is very significant, if this scheme works we can take it further.

If this scheme works very successfully we can take it further but we’ve got a capped scheme, it is affordable and it will help generate significant funds and there is no taxpayer liability other than $1.5 billion. The rest is all covered, the announcements we have made about road and rail and other major projects."